Unit trust yield confusion....

dunstonh

Anyone who thinks the point of investment is a constant search for whatever fund, sector or country is outperforming this year will probably not make much money over the long term

You have just described The Motley Fool. In the past they promoted index trackers, particulary FTSE100 and that has made nothing over the last 5 years. Now they are promoting HYP because that has, although it hasnt done as much over the last 6 months as the yields are no longer what they once were against the purchase prices. What will they be recommending next... in hindsight?

because he (or his advisor or fund manager) will be churning his portfolio all the time and the charges will eat up the profits. Of course we all know this is a key factor in the way the industry makes its profits: that's no secret.

Who said anything about switching? Building a portfolio spread across the sectors costs nothing extra to putting all your eggs in one basket with a HYP. You just said that because you love to put an anti industry spin on things and disregard facts.

High yield portfolios produce steady, and usually double digit returns year after a year, because dividends are stable.

This is why people should totally disregard what you say. You do not have a clue about investing. You assume things always go up.

One of your favourite funds, Invesco Perpetual High Income. An Income fund in the HYP strategy. 4 years ago lost 19.04% in one year. 5 years ago, only made 1.65%. 7 years ago lost 10.24% in one year. 8 years ago made 5.46% in one year. 12 years ago, lost 4.45%.

If you put £100,000 in that high yield portfolio of Eds because she said it goes up by double digit returns each and every year but then found 12 months later that it was valued at £80,960, how would you feel? The answer to that tells you a lot about how you should be investing.

It has been shown that had you picked the best performing fund of 10 years ago you would have less in it now than had you picked a spread across the sectors and only achieved sector average in each sector.

High yielding funds have their merits and any decent portfolio should have them in there. However, do you really want to stick all your eggs into that basket?

dunstonh

carnet wrote:

A little harsh perhaps, dunstonh.

More a thoroughly blinkered view - as all MF advocates seem to have.

Yes. that is a better way of putting it.

EdInvestor

dunstonh wrote:

This is why people should totally disregard what you say. You do not have a clue about investing. You assume things always go up.

No I don't. That's why I queried another poster's claim to get 40% returns every year.

I quite agree that a strategy's ability to weather a serious market downturn is a key factor in any investor's thinking. That's why I am impressed with the HYP idea: just look at the way this one performed starting in late 2000, at the top of boom and enduring the full brunt of the crash :eek:

HYP - 5 year performance record

Care to compare this with a WP bond perhaps - note it provides the same tax free income, but it's real income, not taken from your capital.

High yielding funds have their merits...

An HY share portfolio is even better because you pay no charges. :j

... and any decent portfolio should have them in there.

Quite so.

dunstonh

Care to compare this with a WP bond perhaps - note it provides the same tax free income, but it's real income, not taken from your capital.

I dont wish to compare it to a with profits bond as that isnt what anyone here suggests.

Also, that HYP had £75k invested in just 16 companies. The same portfolio invested across the sectors would have had less than 1% invested in any one company.

Add in that high yield has been the best place to be over the last 5 years, then it is no surprise that it hasnt done too badly. However, if you compare it with a portfolio spread across the sectors using appropriate allocation for a cautious investor over that exact same 5 year period, you would have got a return of 33.89% assuming everything was done on full charges basis giving £100,418. The investment would have had 50% stockmarket exposure only and the single biggest holding was 0.66% of the value.

Very similar results but with a fraction of the risk and not fashion investing into a sector that has, with hindsight, happened to be a very good one.

EdInvestor

Carnet

...the point trying to be made was that the investment system I follow, which you continually denigrate, produces double your return...

I don't denigrate your system - how could I, since you won't reveal what it is, on the spurious basis that "we are not allowed to mention investment products on this forum". People are constantly mentioning differnt funds and strategies on this forum, so let's have it, what is this stunning system that returns 40% plus a year.

I am sure we are all completely agog.

DH

... high yield has been the best place to be over the last 5 years, then it is no surprise that it hasnt done too badly.

LOL,make up your mind.

dunstonh

DH



Quote:
... high yield has been the best place to be over the last 5 years, then it is no surprise that it hasnt done too badly.


LOL,make up your mind.

Reading my posts, I cannot see any conflict. I have agreed that HYP has been a good place to be over the last 5 years. It appears to be on the slide now with other areas in UK being better. It was not the best place to be in the 5 years previous.

However you seem to ignore the key points.

A diverse portfolio utilising 10 funds across the sectors arranged on full charges/commission with only 50% invested in the stockmarket and no more than 0.6% of it invested in one company managed to perform on par with the HYP in exactly the same period.

The HYP was significantly higher risk and is shown in a period that favoured the HYP approach. Yet it couldnt pull away from a cautious portfolio.

Investing is all about opinions and no-one ever gets it right 100%. However, I cannot see anything in what you have posted or that article that would make me think that sticking all your funds into one country/one sector and just 16 companies at that can be seen as a sensible thing to do. Especially when only looking at one 5 year period when that sector was one of the best places to be in.

EdInvestor

carnet wrote:

These are almost invariably small, and very often newish funds with either a talented younger manager as yet unrecognised by the majority of fund investors or a successful, experienced manager who has either been given a new launch to manage or has moved investment house.

Yes, I could list my current funds - but for what purpose ? .

Well why don't you then?

The purpose is obvious - we all want to know how to get a 40% return every year. :T :j


DH

As you know I am always talking about asset allocation, so it should be obvious that the HYP is not the whole portfolio, but the equity portion.

dunstonh

DH

As you know I am always talking about asset allocation, so it should be obvious that the HYP is not the whole portfolio, but the equity portion.

I have noticed you mention asset allocation, with that American chart, however your posts do seem to conflict between HYP and asset allocation at times which makes it hard to follow. In this thread you appear to be against asset allocation.

When you say equity portion, do you mean the UK equity part of the asset allocation or the whole equity content (therefore no Euro/US/Far east etc)?

EdInvestor

When you say equity portion, do you mean the UK equity part of the asset allocation or the whole equity content (therefore no Euro/US/Far east etc)?

In the case of the HYP I have, yes, as it has significant international exposure (as does the FTSE100 of course) and I also don't like the risk of foreign currency exposure. This may be necessary if you are chasing the highest returns, but IMHO it isn't if you are seeking more consistency.

Carnet

I started with an investment pot of £20K in 1985 (made from property deals) and have averaged a return of 16.6% since.

OK thanks, that makes it clear.

dunstonh

In the case of the HYP I have, yes, as it has significant international exposure (as does the FTSE100 of course) and I also don't like the risk of foreign currency exposure. This may be necessary if you are chasing the highest returns, but IMHO it isn't if you are seeking more consistency.

That is a mistake though. You do not get any real international exposure investing in UK companies. They may have overseas links but real international exposure comes from picking equities from overseas.

You say you dont like the risk for currency flucuations but promote a portfolio of 16 companies only. That is far riskier than currency fluctuations.

It also has to be said that a cautious diverse portfolio would be more consistent and less volatile than a HYP.